The SEC has filed a federal fraud lawsuit towards Daniel F. Putnam, Jean Paul Ramirez Rico and Angel A. Rodriguez.
The SEC alleges the defendants defrauded customers out of a minimum of $12 million by cryptocurrency securities fraud.
Along with the first particular person defendants named above, the SEC names Putnam’s seventy-six 12 months outdated father, Richard T. Putnam, as a reduction defendant.
The SEC alleges Richard Putnam acquired cash obtained by fraud by R & D International LLC.
At subject is Dan Putnam’s lengthy historical past of making and selling MLM Ponzi schemes.
Jean Ramirez lives in Columbia and is cited by the SEC as Putnam’s companion.
Angel Rodriguez resides in Utah and is an “interpreter and middleman” between the 2.
Particular Ponzi schemes linked to Putnam (proper) by the SEC embrace Trendy Cash Group, Eyeline Buying and selling and its WealthBoss reboot.
WealthBoss flopped and was merged into the Onyx Way of life Ponzi scheme. Onyx Way of life isn’t talked about within the SEC’s criticism.
Every of the Ponzi schemes detailed within the SEC’s criticism pertain to cryptocurrency associated securities fraud.
Putnam, by Trendy Cash Group, touted that traders might “buy mining machines, run them in [Modern Money Team’s facilities], and earn cash on the income every month.
Buyers have been instructed they may count on to earn income from the profitable mining of digital belongings by the mining operation.
Putnam raised roughly $3.25 million by the sale of mining machines and participation within the mining operation to almost 2 hundred traders.
Among the many mining operation traders is D.B., who invested over $600,000, purportedly in alternate for almost 500 mining machines and the income that might be generated by the mining operations, which have been to be saved remotely and operated by or below the management of Putnam.
D.B.’s machines seemed to be working for a number of months, throughout which period D.B. acquired weekly payouts that have been displayed on his Trendy Cash Group again workplace web site, a web site interface the place traders might monitor their purported income.
D.B. usually reinvested his income to buy extra machines.
In or round November 2018, D.B. stopped receiving payouts, and Putnam instructed him that, as a result of drop in value of digital belongings, mining was not worthwhile.
D.B. started requesting that he take bodily possession of the mining machines he believed he had bought, however, over the course of a number of months, Putnam gave excuses for why D.B.’s machines couldn’t be delivered to him.
Finally, in February 2020, Putnam instructed D.B. that he might choose up his machines in Salt Lake Metropolis, Utah.
Upon info and perception, D.B. has nonetheless not obtained bodily possession of any mining machines from Defendants.
After Trendy Cash Group’s mining Ponzi ran its course, Putnam and Ramirez launched buying and selling packages.
Starting with Trendy Cash Group, after which later with Eyeline Buying and selling and WealthBoss, Putnam started providing buying and selling packages to traders.
Putnam represented that the buying and selling packages derive income from digital asset buying and selling and arbitrage actions being performed by “skilled merchants which are consistently monitoring the information in anticipation of value fluctuations that might create worthwhile buying and selling alternatives.”
Putnam additional instructed traders that their funds could be held in Bitfinex buying and selling accounts managed by Ramirez, who was accountable for conducting the buying and selling.
One investor presentation said that traders can “[e]arn no matter what’s occurring out there.”
With regard to the packages promoted by the Eyeline Buying and selling MLM, Putnam represented that the packages have been “particular person accounts” which are “not pooled” and that traders can “begin . . . or cease at anytime” or “withdraw [their] principal at anytime.”
To buy the buying and selling packages, some early traders wired funds or deposited money into Putnam’s private checking account and financial institution accounts for MMT Distribution, LLC. Putnam was then to transform the fiat forex into digital belongings, which have been then transferred to Ramirez who would use the funds in his buying and selling actions.
Finally, Putnam started requiring traders to buy the buying and selling packages with digital belongings.
Till November 2019, traders’ again workplaces confirmed weekly features, and traders have been in a position to make periodic withdrawals from their accounts.
In November 2019, nevertheless, the Putnam MLMs stopped making the purported revenue funds to traders and buying and selling actions appeared to stop.
Putnam instructed traders that Bitfinex had put a freeze on Ramirez’s buying and selling accounts, thus ceasing Ramirez’s buying and selling actions and shutting him off from entry to the funds held in these accounts.
Since that point, traders have acquired no return on their investments and have been unable to make any withdrawals of principal or purported revenue.
One group of traders, recruited by a person cited as “J.A.”, collectively invested $7.2 million in Putnam’s schemes.
Putnam managed the weekly withdrawal requests from the J.A. group of traders.
These withdrawals have been constantly delayed and Putnam often made excuses for why withdrawals couldn’t be made on time.
As with the Putnam MLM traders, J.A. and his group of traders have been not in a position to entry their funding funds starting November 2019.
To disclose the Ponzi nature of Putnam’s schemes, the SEC subpoenaed Bitfinex for particulars of the alleged frozen account.
In or round January 22, 2020, Putnam instructed Trendy Cash Group traders that the Trendy Cash Group Bitfinex account held roughly 260 bitcoins.
Moreover, again workplace information for the J.A. group of traders confirmed that, as of November 2019, these accounts held a mixed whole of 2061.2951 bitcoin, which Putnam represented have been being traded in accounts managed by Ramirez at Bitfinex.
In actuality, Bitfinex information present that Ramirez had only one buying and selling account, which by no means held greater than 50 bitcoin at any given time, and that was closed in or round Might 2019.
So what truly occurred with the cash that was invested into Putnam’s schemes?
Effectively, like and different Ponzi scheme he and Ramirez misappropriated it.
In line with Putnam’s personal account of his settlement with traders, Putnam was not entitled to any portion of traders’ principal funding, however as a substitute was to be compensated solely although income derived from the buying and selling actions.
Financial institution information additionally exhibit misuse of investor funds.
In a single occasion, two traders deposited funds totaling $112,500 into the MMT Distribution, LLC checking account between August 7 and August 8, 2018.
Financial institution information don’t mirror that these funds have been exchanged for digital belongings.
As a substitute, on August 15, 2018, Putnam wired $105,273 from the account to buy a condominium in his title in Cedar Metropolis, Utah.
Equally, on January 26, 2018, Putnam’s private account had a stability of $8,914. Between January 29 and February 8, his account acquired 4 investor deposits totaling $28,500 and one switch of $34,000 from one other entity he controls VIP Offers, LLC, for whole deposits of $62,500.
Throughout the identical time interval, Putnam transferred $13,000 again to VIP Offers, LLC, bought a $33,827 spa and made quite a few private purchases.
Putnam didn’t use funds as represented. As a substitute, Putnam used investor funds to buy a condominium and to pay for different private bills
Along with operating a Ponzi scheme, the Trendy Cash Group, Eyeline Buying and selling and WealthBoss earnings alternatives have been all unregistered securities choices.
Putnam represented to J.A. that the buying and selling packages have been SEC compliant.
Opposite to this illustration, Putnam filed no registration statements with the Fee with respect to the buying and selling packages, nor had he taken every other steps to guarantee compliance with Fee statutes or guidelines.
Quite, the buying and selling packages weren’t compliant as a result of they have been provided and bought in unregistered choices and weren’t topic to an exemption from the registration necessities of the federal securities legal guidelines.
Whether or not our evaluations stating securities fraud in every one in every of Putnam’s schemes had any impact I can’t say, however each Putnam and Ramirez have been properly conscious of what they have been doing.
In or round February 13, 2019, Putnam said to Rodriguez, “We’re going to carry Jean Paul [Ramirez] a lot cash this 12 months . . . We’re both going to retire this 12 months or go to jail . . . And Im [sic] nonetheless unsure any of it’s actual.”
In subsequent WhatsApp communications, Putnam
(1) mentioned with Rodriguez shopping for “a seaside home in a foreign country in case we have now [to] flee,”
(2) said, after being pissed off with Ramirez’s failure to make payouts, that it “[j]ust looks like Jean Paul may be operating a ponzi,” and
(3) expressed that he was “just about 100% [Jean Paul] is a scammer.”
Further WhatsApp communications exhibit Putnam’s and Ramirez’s precise data that Ramirez was making Ponzi-like funds.
In or round July 22, 2019, Rodriguez said, “I talked to [Ramirez] and he instructed me he was going to have [the payments] at this time however he must be cautious as a result of he’s going to be paying from principal” and thus wouldn’t “have something to commerce later.”
It actually doesn’t get any extra clear lower then that.
Claims for reduction cited by the SEC embrace violations of the Securities and Change Act.
The SEC is searching for a everlasting injunction towards the defendants, disgorgement of ill-gotten features and a civil penalty.
Keep tuned for updates as we proceed to comply with the case.
Replace seventh June 2020 – As per an ex-parte Might seventh order, the SEC was awarded an asset freeze towards the defendants.
Replace twenty third April 2021 – Citing COVID-19, the complexity of discovery that comes with crypto fraud, and involvement of “as many as 50 third-party witnesses”, the events requested entry of an amended scheduling order on April seventh.
The Events have been diligent in conducting discovery. They’ve propounded written discovery and have served quite a few third-party subpoenas.
But the Events nonetheless have important discovery nonetheless to conduct together with acquiring extra paperwork from third events and finishing as many as 15 depositions.
The court docket granted the requested modification later the identical day.
As per the order, a scheduling listening to has been set for January twelfth, 2022.
Ought to the case not be resolved through settlement, it’s anticipated a trial will happen later within the 12 months.
Replace thirteenth August 2022 – Dan Putnam’s securities fraud case has been pushed again into 2023.